Agenda - 05-16-2017 - 6-a - Amendments to the County’s Fund Balance Management Policy Regarding the General Fund Unassigned Fund Balance

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6 17 General Fund Cash flow Gary Donaldson said the long term financial plan is a better narrative, and the fund balance becomes a part of this. Commissioner Rich asked Gary Donaldson if he believes the County needs a fund balance policy. Gary Donaldson said yes, because the rating agencies weight it highly. Chair McKee asked if, in his professional opinion, the fund balance should stay at 17%. Gary Donaldson said when the current audit is concluded, there will be a clearer part of the picture; and when a 5-year financial plan is developed, the question will be better answered. He said he thinks 17% is a good level. Commissioner Dorosin asked if any analysis was done prior to the balance being set at 17%. He clarified that Gary Donaldson is suggesting that the amount should be set by financial projection and other variables. Gary Donaldson said a plan is simply a plan, and the rating agencies will not necessarily view a deviation from said plan as a negative. He said in his view, two months of expenditures should be the model. Commissioner Dorosin said the Local Government Commission (LGC) requires 8% and the Government Finance Officers Association (GFOA) says 16%, the latter of which he thinks to be overly conservative. He said the Board should consider lowering it. He knows there is a financial aspect to this, but he likens it to a personal savings account, which one uses when one needs it. He said he does think a policy is needed, but he finds the current fund balance of 18% to be too high. Gary Donaldson said when the audit results are received, and a 5-year financial plan created, it will be easier to determine what the fund balance should be. He said a draft 5-year plan will be completed by January 2017. Bonnie Hammersley said the rating agencies want policies and 5-year financial forecasts, but it is up to the elected officials to determine the policies. She said the organization must be sustainable, which is dependent on economic, environmental and social factors. She said no one knows the magic number, but if there are policies in place and the County is sustainable, then the number is what the elected officials want it to be. Commissioner Jacobs said the decision to be fiscally conservative was made to navigate the recession years ago, but there have been surpluses every year since. He said there has to be a relationship to interest rates. He said it does seem reasonable to change the fund balance amount now. Commissioner Jacobs said he would not want this to be a floating target, and having enough for two months expenditures is a starting point for a discussion. Commissioner Burroughs said it does not take a large change to get some revenue. Commissioner Dorosin said when people are being taxed, and there is an annual surplus, it is unfair. He said there are additional needs, for which the funds could be used. Commissioner Burroughs said the Manager and staff have worked hard to tighten the budget, and there is still an overage. Bonnie Hammersley said, over the last two budgets, she has been able to use some of the surplus for the betterment of the County. She said she adjusts the budget to what is available, and there are controls in place to follow the policy. She said the policy sets a rule to follow. Commissioner Dorosin suggested lowering the fund balance to 16.2%. Chair McKee said he would not oppose going to this rate, but he sees two issues: the fund balance, and the excess fund balance that exists each year. He said it is a question of